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Bolton China fund set to raise £630m

Fidelity plans an initial capital raising of £630m for Anthony Bolton’s China special situations investment trust.

Investors will be able to apply for shares once the public offer opens on February 26 and closes on April 5, 2010, with admission to the London Stock Exchange and dealing set to commence on April 19, 2010.

The closed-ended investment company will have a minimum investment of £2,500 with an annual management charge of 1.5 per cent. It will only be available for lump sum investments. The fund is also set to have a performance fee ahead of its respective benchmark.

The £630m raising will be split 50-50 between retail and institutional investments.

The fund will be China listed and will be able to invest in securities in both China and Hong Kong and Chinese companies listed elsewhere. The fund can use derivatives and will be able to short when the fund manager deems appropriate.

Shares in the company will be available at £1 and made available through a public offer for subscription in the UK and a placing in certain overseas jurisdictions. The fund will be available in a Fidelity Isa in both tax years, it will also pay 0.5 trail within the Isa.

Bolton is famed for his time on the flagship Fidelity special situations fund, which he managed from 1979 until the end of 2007.

He says: “I am very confident that there will be very many stock-picking opportunities in China in the years to come. I see many similarities with investing in Europe in the early part of my career. Then, my longer-term, research-led approach was considered unusual in a market more used to short-term trading but it proved to be successful. I think the same will be the case in China and I expect that my experience in Europe will be helpful as I see the composition of the market shifting from an emphasis on manufacturing and financials to include more service-oriented companies.”

 “History shows that many developing economies go through acceleration in their growth once GDP per head reaches a critical level, phenomenon called the ’S’ curve effect. The most interesting aspect of China’s development is its position on this curve. It is in the investment “sweet spot” where incomes per head of population rise steadily and levels of consumption increase at an accelerating rate for a period of time.  Exactly the same process took place in Taiwan and Korea 20 or 30 years ago and in Japan before that. The difference this time is the scale on which the transformation is happening. Never before has this kind of development happened in a country of over 1.3bn people.”

 “This development has led to some concerns being expressed recently about the inflationary outlook in China and whether an asset price bubble is beginning to develop. I think these worries are overstated. On inflation, the Chinese have a record of moving in a measured way to slow credit expansion and I do not expect them to act in the sudden, aggressive way that can unsettle investors. As for a bubble, I think it is much too soon to be talking in these terms. The Chinese market began its recent rise in November 2008 and, in my experience, bubbles take several years to develop, not a little over one.”


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